William Harper took early retirement from Westinghouse
in 1989 and began to work on an invention -- a way to improve trailerable pontoon boats. The technical challenges were substantial
as were the research and development costs. He kept careful track of his
expenses and, at his accountant’s direction, wrote them off each year. Then,
two years into his development work, he got an audit letter from the IRS questioning
his inventing deductions for the prior year. Thus began a two-year sojourn in
which Harper met with an IRS auditor four times and ended up hiring a lawyer. Finally, after two years, the IRS
admitted it could find nothing wrong with his deductions and the case was
closed. The IRS cost Harper a lot of time, aggravation and
attorney and accounting fees. But it could have been a lot worse. Because
Harper kept proper records, filed an accurate tax return and claimed only those
deductions to which he was entitled, he was able to beat the IRS. Other
inventors have not been so lucky.

William Harper’s experience should serve as an object
lesson to every self-employed independent inventor: You may not be interested
in the IRS, but the IRS is interested in you. You need to pay careful attention
to tax matters. This section provides an overview of the brave new world
of taxation you are about to enter as an independent inventor and explains some
ways to deal with it efficiently.

We'll be adding some helpful tax related articles soon, so please check back for tips on saving on your taxes.

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Here are some articles that can help inventors and innovators sort out tax questions.